The Shale Boom Won’t Be Repeated on Federal Lands

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A visit to Yellowstone National Park last week has me thinking about federal lands. In the fight over whether the U.S. oil and gas boom is happening because of or despite President Obama’s policies, perhaps the most commonly heard fact is this: oil production is surging on non-federal lands but is down on lands controlled by Washington. This observation, many claim, shows that oil and gas production is up despite U.S. policy to thwart it – and a policy reversal would send oil and gas output far higher.

An intriguing little study published earlier this week by the Center for Western Priorities pokes some enlightening holes in that argument. The study authors observe that recent gains in U.S. oil and gas production have been driven primarily by production from shale plays. Then they ask a simple question: How much of the U.S. shale oil and gas resource is located on federal lands? The answer, they find, is less than 10 percent – a surprising figure given that about 30 percent of U.S. land is federally controlled. The upshot is that opening more federal land for shale development wouldn’t have huge consequences. [UPDATE: Michael Wara makes an important observation in the comments: many shale resources are controlled by BLM even if the lands above them aren't. That makes federal decisions critical in some cases.]

One can quibble around the edges with the study: it seems to mis-classify some plays (it divides them into oil, gas, and mixed, not always correctly), and it focuses on surface area covered by various plays rather than on the volume of resource underneath. But the first problem has no impact on the aggregate results. And the second is just as likely to cause the authors to overestimate the fraction of shale opportunities that are on federal lands is it is to lead them to underestimate it.

A look at this map, which appears to have informed the new study, helps explain what’s going on. The vast bulk of federal land is located west of the Rockies, but the great majority of the U.S. shale resource is located east of the Continental Divide. Even in California, where federal lands cover a large part of the state, they don’t overlap much with the shale resource; that remains true even if you look at more expansive definitions of that resource than the new study uses.

This isn’t to say that there aren’t big oil and gas production opportunities on federal lands. Shale isn’t the only game in town: there are large conventional and offshore resources on federally controlled tracts, and production from them could increase substantially with policy changes, though with attendant costs (more on that in another post). But this ought to be separated from the question of whether the shale boom would be a lot bigger with more access to federal lands. It probably wouldn’t be.

Opinions expressed on CFR blogs are solely those of the author or commenter, not of CFR, which takes no institutional positions.

While there are not many shale plays on/under federal land, there is plenty of conventional oil and natural gas out there that is not being developed… But several factors are holding back conventional production:

- One, the permitting process on federal lands took 154 days in 2005. In 2012, permitting on federal lands took an average of 307 days. And while permitting times on federal lands have nearly doubled, the time to get permit on state regulated lands is usally less than 30 days.

- Two, from FY2008 to FY2011, the BLM offered 81 percent less acreage for oil and natural gas development.

- As a result of these trends, oil and natural gas production on federal lands has fallen by over 40 percent since 2000.

- With that decline, revenue from oil and natural gas development has dropped precipitously at a time when our federal budget deficit has exploded.

Until something changes at the White House — there definitely will not be an energy boom on federal lands — which is unfortunate for American taxpayers who are missing out on billions of dollars in royalty payments and tax revenues.

Posted by Michael WaraMarch 8, 2013 at 2:30 pm

Michael,

I can’t speak for the other plays in this report but so far as the Monterrey Shale goes, the authors make a critical error.

While it is true that the surface rights are in private hands, that does not change the fact that the mineral rights are held by BLM. In California, we have the first example of a split estate where the feds control the resource. Thus federal policy matters a lot in California.

I’m also not sure what fraction of the potential shale oil plays out there are represented by the Monterrey Shale – the common number one hears is that there are ~15 billion barrels of technically recoverable resource in the Monterrey Shale. Whatever fraction of the potential unconventional resource that represents, there is certainly a lot of excitement (or dread) about it out here.

The shale boom was developed in areas that had long been open to drilling. The Barnett, Eagle Ford and Bakken were well known as source rocks and had actually been produced before. The change was the development of very precise directional drilling capabilities that enabled horizontal completions and multi-stage frac jobs. How many shale plays are there on the unavailable Federal lands? How many regular old conventional drilling plays are there on unavailable Federal lands? The answer is: A lot.

Furthermore, this study ignores the “mother-of-all” shale plays: the Green River Oil Shale of the Piceance Basin. 75-80% of this play is under Federal lands and very little of it is available for meaningful exploitation efforts. While it is true that this is a very unconventional hydrocarbon play, it contains more than 1 trillion barrels of recoverable “oil” (high grade refinery feedstock). The economic and technological barriers that prevented this play from going forward in the 70s and 80s no longer exist. The Green River could be yielding 500,000 BOPD within a decade. ANWR could be yielding 400,000 BOPD within 5 years. And the GOM deepwater would have already been yielding 400,000 BOPD more than it currently is, if not for the moratorium and permitorium.

Posted by R J TaylorMarch 8, 2013 at 8:38 pm

To find and develop any shale play requires the investment of millions and millions of dollars. Finding the shale is probably the easy part of the equation. Figuring out how to get the resource out in a cost effective manner is the tougher matter.

It has become so politically difficult to explore and develop on Federal lands that oil companies are now avoiding federal lands wherever possible. Thus, fewer companies spending money on Federal lands means fewer shales on those Federal lands become commercial.

I am in the business and am working shale plays from the Rockies to Pennsylvania and avoid Federal lands whenever possible. If I know an area has a majority of lands owned by the Feds, I just go looking for another area to explore.

Posted by geneMarch 9, 2013 at 8:33 am

The more obvious reason for less reserves on Federal Land is that nobody has bothered to look hard enough. The harder we look the more oil we find. If you go deep, huge amounts of oil magically turn up. Funny how Russia has the best deep well technology and pumps the most oil. Fossil fuel is a joke, our fuel seeps up from the bowels of the Earth where it is generated from the heat and pressure of the Earth.

[ML: I'd agree if the study had looked at reserves; but it look at resources. These are pretty well known from basic geology]

Posted by Keith BowersMarch 10, 2013 at 11:11 am

All the ‘excitement’ about ‘shale oil & gas fails to mention the extremely rapid production decline of these wells. While ‘lifetime’ of the wells may be 20 years, the last 18 of that are as 10BPD ‘stripper’ wells.